Superannuation can be super complicated sometimes.
Your superannuation is one of your most important assets. And like other assets, divorcing can have a number of wide-reaching consequences for this important part of your future financial stability.
Unfortunately, many Australians do not understand enough about superannuation to begin with, leading to considerable confusion in divorce cases.
As the main source of income most people will have during their golden years, it’s important that you make the right decision with your super when a relationship breaks down.
And that starts by understanding Australian superannuation laws in regard to divorces.
Read on as our SMSF accountants in Melbourne break down what happens to your super when you get divorced…
Understanding superannuation: what happens to your super when you divorce?
Divorce can be a tough time.
Not only is there the emotional strain, but there’s also financial stress too as you and your partner work together to unwrap your finances from one another.
In many cases, this includes questions surrounding superannuation as well.
First thing’s first: yes, superannuation is counted as property.
And like your home, savings or any other assets you and your (soon-to-be-ex) spouse own, superannuation is fair game in divorce proceedings.
It isn’t just marriages, either – in certain cases, de facto couples may also choose to do a super split following divorce.
We understand that you’re focused on the immediate issues, and that you might not have the energy to focus on something like understanding how superannuation is affected by divorce.
However, it’s crucial if you want to ensure that you have enough to retire on!
What you need to do
Step 1: calculate the total of your super
And we aren’t just talking about your super balance, either – both parties to a divorce need to calculate the total value of their combined superannuation as part of divorce proceedings.
This information is essential in building a clear picture of your superannuation requirements, as well as ensuring that both of you are able to come to a fair and equitable agreement.
Both you and your partner have a legal right to request superannuation information from your respective super funds. Of course, this isn’t as simple as just ringing their provider and asking for details – first, you’ll need to apply for a form with the Family Court of Australia.
Once you have this form, you can request your partner’s super information.
Step 2: come to an agreement
Once both you and your partner have an idea of where you both stand, it’s time to negotiate.
During this stage, we strongly recommend getting legal advice and consulting with a financial planner or a personal accountant in Melbourne.
The decisions you make here will reverberate for years to come, so it’s important that you get it right.
Professional advice can help you understand:
- How any proposal will affect your future retirement income
- Your legal rights
- What you owe your partner
In addition to this, they can also help you hash out the details and mediate in if disagreements arise.
Finally, this sort of outside help can also help if in the worst-case scenario your divorce goes before the court (fingers-crossed it never reaches that point).
Step 2a: apply for a Consent Order
Once you and your partner reach an agreement, you’ll need a Consent Order.
This is a written agreement that states that both you and your spouse have come to an agreement, as well as the details of that agreement.
Step 2b: legal action
Sometimes, you won’t be able to come to an agreement – in these cases, outside intervention might be needed.
In most cases, this takes the form of mediation or arbitration – in some instances however, it escalates to the Family Court of Australia.
Step 3: get in touch with your super funds
Once you come to an agreement, it’s time to tell your super funds so they can put the plan into action.
This is where you submit your super splitting request, which involves sending a copy of your Consent Order (or court order) to the super funds in question.
Just a heads up, however: some providers may charge fees associated with actioning your super split agreement. Be sure to check your superannuation provider’s policies first.
“Do I need to make a decision right now?”
Not at all!
Divorce is a stressful time. If you don’t feel up to the task of making a decision right now, you don’t have to.
Just because superannuation can be split following a divorce doesn’t mean that you have to.
Depending on your circumstances, you may choose to:
- Leave your superannuation untouched
- Defer the decision until you and your spouse reach retirement age
Which decision you make depends on your circumstances.
No matter what you decide to do however, it’s important that you understand your current financial situation, as well as the implications your decisions may have.
Our personal accountants in Melbourne help you understand what each of these options means for you, as well as which one will provide you with the income you need to enjoy your retirement in comfort.
What about self-managed superannuation? An SMSF accountant in Melbourne explains!
That’s all well and good – but what about SMSF?
After all, many SMSFs are set up so that both spouses are trustees of the same fund. Will this complicate things?
Unfortunately, the answer is often “yes”.
While you may be separating, that doesn’t absolve you or your partner of your responsibilities as trustees of an SMSF.
You still need to act in the best interest of all other trustees – it’s illegal for you to take punitive actions such as:
- Excluding your spouse from the decision-making process
- Ignoring requests to transfer wealth and assets
- Deliberately sabotaging the fund’s performance
At the end of the day, your super is still tied up in your shared SMSF. Take it from our SMSF accountants in Melbourne – you’re only hurting yourself!
Our personal accountants in Melbourne provide stability in a tumultuous time
Learn how to understand your superannuation
Do you need help making the next step? Unsure how your divorce is going to affect your superannuation?
Our personal accountants can help.
We get it, superannuation can be a tricky thing. But it doesn’t have to be… assuming you get the right advice and help, that is.
Find out where you stand financially, and what you need to do to enjoy greater financial security – our personal accountants in Melbourne help individuals at every stage of life live free from financial worries.